Two Stocks to Watch This Month in Biotech

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We may be heading into the holiday period, but things aren’t slowing down in biotech. We’ve got a host of PDUFA dates set for before the end of the year, all of which have the potential to inject some real volatility into the space. Here are two biotech stocks to keep an eye on.

Otonomy, Inc. (NASDAQ:OTIC)

Otonomy is one of those stocks that flies under the radar of market awareness. It hasn’t embarked on any noticeable promotional activity (at least not outside of the sector specific side of things) and has just quietly developed its pipeline over the past few years. The company focuses on treating conditions that affect the ear – known as otic disorders in the industry – and has three candidates in its pipeline. The lead candidate, Auripro, is up for an FDA review date of December 25, 2015, with a target indication of middle ear effusion – fluid in the middle ear that causes pain and discomfort (through infection) in children.

The treatment is pretty much just a reformulation of the current SOC treatment, which is antibiotic ear drops, but is designed as a sustained release therapy. This allows a full course of treatment to be administered in one issue, rather than the multi daily issue of the aforementioned drops. In children undergoing tympanostomy tube placement (TTP) surgery (the surgery this condition is associated with), the benefits of not having to repeatedly administer antibiotics are obvious.

The FDA accepted the company’s NDA back in April and – according to the release – Otonomy believes the agency will not convene an advisory panel pre-review. This suggests the FDA regards the review as pretty straightforward, improving chances of approval. The phase III on which the NDA rests demonstrated efficacy (as measured by a primary endpoint of reducing treatment failures versus SOC) and safety across a sample size of 532 children.

So – the date to watch is December 25. If the FDA gives the green light, Otonomy expects to kick off commercialization during Q1 2016. As always, keep an eye on the company’s PRs in the days heading up to PDUFA. Its not unusual for the FDA to put out is guidance a few days, or even weeks, early, and you’ll want to be ready when they do.

BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)

This is a big one, and one that we will probably look at in a little more detail over the coming weeks – but here’s a primer. BioMarin has spent years developing what – on approval – would be the first FDA approved treatment for duchenne muscular dystrophy (DMD). DMD affects 1 in every 3,500 new borns, and is a fatal condition, meaning any treatment could be a real blockbuster for the company that commercializes it.

The treatment – drisapersen – is what’s called an antisense oligonucleotide. It is a synthesized nuclei acid that binds to the gene that causes DMD, a faulty dystrophin gene, and essentially deactivates it. This deactivation causes the the production of a truncated, but functional, dystrophin gene. DMD comes about as a result in the fault dystrophin gene not creating enough dystrophin protein, which is the protein responsible for muscle structure and stability. By replacing faulty with truncated functional, BioMarin is hoping to improve muscle structure in DMD patients.

It’s not that straightforward, however. The drug missed its primary endpoint in the phase III on which the NDA is based, and all too often this leads to a red light from the FDA. BioMarin has requested the FDA consider the totality of data, which essentially is a request for the FDA to look at all trials, based on the company’s suggestion that the subjects in the phase III were already at an irreparable stage of DMD.

An advisory panel met at the end of last month, and while it didn’t report an overarching recommendation (as requested by the FDA) it did release the votes on certain aspects of the data. You can read them here, but to summarize, they don’t look good. The downside has the majority in each of the four categories surveyed, and there is very little to suggest the panel is behind drisapersen. With this said, there is no DMD treatment available, and the FDA may take the opinion that, as long as the drug is safe (which trials suggest it is) then marginal benefit is enough to give it the greenlight.

Estimates put a 15% upside in BioMarin’s market capitalization on an approval announcement, and a 20-25% downside on a decline. The big day – the PDUFA – is set for December 27.

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